Are you a young person intimidated by the seemingly impossible idea of getting a home loan? Or have you got a young child or friend that is just starting to find their feet financially? There are a number of things that you can do now that will benefit you in decades to come. Smart financial planning and forward thinking can make a huge difference in the long run. As they say, hindsight is always 20/20. There are literally thousands of people who are still kicking themselves over small financial mistakes made in their twenties. So here are some financial tips to start using now, which will help you set yourself up in the coming years.
Get a good understanding of the value of money
When you are young and first start working full time, your paycheque may tempt you to ‘make it rain’ on the weekend. Although it may be fun for a while, it’s best to break out of that habit as soon as possible. Get an understanding of what that impulse purchase really costs. What percentage of your paycheque is that new dress? If you saved up that amount every week, how much would you have at the end of the year?
Know where your money goes
Small purchases can really add up. Check your bank statements regularly and you may find that you are spending money in all the wrong places. Always make sure that your spending does not exceed your income. How much do you spend going out on the weekend? Do you buy or pack lunches for work? Saving on these unnecessary expenses can really stock up your savings.
Use that credit card sparingly
Credit cards can come back to bite you. Some young people find this out the hard way. If you get a credit card, keep it for emergencies only and always have a repayment plan in place any time you borrow money. Just remember that you are relying on future earnings you haven’t actually gotten yet to buy anything on that card. Image from dosomething.org
Get prepared for the unexpected
When you are young, you may think that you are invisible. But you can never know when accidents or misfortune may come your way. It happens to everyone at various different points in life. If you have a little savings behind you when that unexpected redundancy or health cost comes along, you will save yourself a lot of stress and you wont have to go into debt just to get by.
Tax a look at your taxes
Taxes bore and annoy most people. But if you can get an understanding of the system you can use it to your advantage. I’m not talking about any illegal tax dodging here, just about getting an understanding of what you can claim as a tax expense and what percentage of your income goes into your tax. Look at your pay check carefully, how much are you being taxed and why?
Learn about investing
Like taxes, investment tactics and interest rates are not the most interesting topics to the majority of people. But it isn’t rocket science and it can really help you to amass your personal wealth. There is a range of investment options available, from stocks to compound interest accounts. Talk to a financial planner or advisor, but be wary of flaky commission-based practitioners. Better yet, spend some time online and do the research for yourself for free. Overall, if you take one thing away from this article make it that a secure financial situation relies on forward thinking and planning. Enjoy yourself but be mindful of your money. With a few little extra steps here and there, you will find yourself with a nice nest egg by the time you start thinking about settling down.